Source of this article: Times Finance Author: Guo Peng
In 2024, the three squirrels will get off to a good start, laying a good foundation for returning to the goal of 10 billion. According to the financial report for the first quarter of 2024 released by Three Squirrels on April 16, the company's revenue was 3.646 billion yuan, a year-on-year increase of 91.83%, net profit was 308 million yuan, a year-on-year increase of 60.80%, and non-net profit was 263 million yuan, a year-on-year increase of 92.84%. It is reported that this is the largest increase in the performance of the first quarter since the listing of the three squirrels. Three squirrels said in the financial report that the performance performance will lay a solid foundation for the realization of the overall goal of "returning to 10 billion yuan and becoming stronger in the whole country" in 2024.
The three squirrels financial report also said that in the first quarter, the results of the reform in 2023 will be continued, and under the guidance of the general strategy of "high-end cost performance", the terminal products will be more cost-effective through the new supply system of "one product and one chain", but the gross profit margin of the core category will remain stable; Profit growth.
At the end of 2022, Three Squirrels proposed a "high-end cost-effective" strategy, which will be implemented in 2023. After the implementation of this strategy, the performance of the three squirrels has gradually recovered, and the net profit in 2023 has increased significantly. At the 17th China Nuts and Dried Foods Exhibition, Zhang Liaoyuan, founder and CEO of Three Squirrels, said that the "high-end cost-effective" strategy of Three Squirrels has brought us out of the "darkest moment".
The high-end cost-effective strategy has gained a lot and entered the field of raw materials in the upstream of the industry
The three squirrels have repeatedly attributed their performance growth to the "high-end cost-effective" strategy. According to the company's 2023 annual report, the company's operating income was 7.115 billion yuan, and the net profit was 220 million yuan, a year-on-year increase of 69.85%. Three Squirrels said that driven by the "high-end cost-effective" strategy, the company will rapidly achieve contrarian growth in the third and fourth quarters of 2023, with a total contribution of more than 1 billion yuan.
At the end of 2022, the three squirrels clearly put forward the "high-end cost-effective" strategy for the first time. Three Squirrels believes that China's retail industry is undergoing a major transformation of supply and demand, in which the total supply is oversupplied and the supply mode is more diversified, but the aggregate demand is relatively insufficient. There are three main characteristics of this change. Secondly, at the channel level, with the improvement of the three major infrastructures of "AI digitalization, urbanization construction, and transportation and logistics", the traffic is highly differentiated, and the channels to reach consumers are diversified and the cost is lower; finally, in terms of demand, consumers are more rational and pay more attention to cost performance.
Zhang Liaoyuan said that in the past, nuts were very expensive and high-end in people's minds, and when everything changed and everyone could afford it, nuts actually became a popular product, and the entire supply system would be pushed back by demand, including planting, processing and sales.
Based on this, the three squirrels set the "high-end cost-effective" strategy as guided by market demand, consumer-centric, innovation-oriented, through the integration and reorganization of the whole link and all elements, so as to achieve "shorter links, more advanced tools, and more collaborative organizations", so as to achieve higher quality, more differentiated and more affordable products under the basic conditions of leading the total cost of the whole transaction and all channels, and at the same time superimpose the brand power of squirrels, so that consumers can feel the new value of the brand again.
In order to advance the strategy, the three squirrels have made changes in terms of raw material procurement, product manufacturing, and product delivery. At present, the three squirrels have achieved direct sourcing of nut raw materials, and have carried out comprehensive cooperation with the world's largest summer fruit farm Golden, cranberry farm Ocean Spray, etc., up to now, macadamia nuts, pecans, hand-peeled almonds, cashews, dried cranberries and other large items have achieved direct sourcing at the place of origin. At the same time, the company has established nut raw material supply bases in Yunnan, Guangxi and other places in China with suppliers to promote the localization of nut raw materials. At present, macadamia nuts originating from abroad are planted in Yunnan and Guangxi for 4 million mu, and Anhui whole pepper pecan is planted in an area of about 85,000 mu, which is known as the "pecan capital of China".
The Douyin channel became the core, bringing new life to the three squirrels
With the help of the high-end cost-effective strategy, the three squirrels have penetrated into the upstream raw material field, and in the downstream delivery field, the sales channels of the three squirrels have also changed. In the field of e-commerce, Douyin, as a rising star, is playing an increasingly important role.
The changes in Douyin, Zhang Liaoyuan knows best. Now, Zhang Liaoyuan is not only the founder of Three Squirrels, but also a Douyin expert. Looking at his Douyin account "Squirrel Daddy_Zhang Liaoyuan", from the beginning of 2024, he resumed the updates that had been interrupted for three years and began to publish content frequently. In his videos, some of them share their management experience, some lead people to visit the Three Squirrels factory, some come to the front line to communicate with dealers, and some tell about the high-end cost-effective strategy of Three Squirrels.
Zhang Liaoyuan has 282,000 followers on Douyin and is a well-known "Internet celebrity", and Douyin has also brought great changes to the three squirrels. In a media interview, Zhang Liaoyuan mentioned an accident in April last year, which made them start to pay attention to Douyin officially. At the beginning of 2023, the global market for macadamia nuts is in excess of demand, and the cost of raw materials is almost halved, and Three Squirrels has launched a 360g macadamia nut pack of 19.9 yuan/10 packs on Douyin. After a round of fermentation, a few weeks later, the daily sales reached one million. A talent with less than 40,000 fans began to bring the product on April 1, and as a result, the monthly sales of this talent exceeded one million yuan. This shocked everyone of the three squirrels and began to face up to the Douyin channel.
The Douyin channel has brought handsome rewards to the three squirrels. Since May 2023, the company has achieved a substantial increase of nearly 500% in a single month on Douyin, and has been ranked first in brand sales in the food category on Douyin for a consecutive year, which has reversed the supply chain reform under the new strategy of "high-end cost performance" and created a large number of cost-effective large items.
In 2023, Three Squirrels will launch a total of 120 new products on short video channels, of which 14 new products will sell more than 10 million yuan. It is precisely because of the rich and cost-effective product pool of the three squirrels that it has attracted many experts to bring goods. According to official data from Douyin, there are 12,200 Douyin food experts with annual sales of more than 500,000, and more than 6,200 squirrels have cooperated, with a penetration rate of 51%, more than half of the total.
In 2023, Douyin's channel revenue will appear in the annual report for the first time, and the channel's revenue will reach 1.204 billion, surpassing the Jingdong channel and becoming the second place in the online sales channel, with a year-on-year increase of 118.51%, of which the revenue in the second half of the year will be 768 million, a year-on-year increase of more than 260%.
Douyin's channel revenue has increased, and its position in the three squirrels channel is also increasing. In 2024, the goal of the three squirrels is to strengthen the omni-channel with "Shake + N" synergy as the core. Douyin is an important foundation for the "Douyin+N" omni-channel model. The three squirrels believe that Douyin has two major advantages, the first is that it can quickly establish a scale advantage through the matching of goods and operations, so as to drive the supply chain reform with high-quality channels, and further realize the optimization of full-link and all-factor costs, so as to comprehensively enhance product competitiveness and quickly penetrate the supply chain;
From an ecological platform to a manufacturer, controlling upstream manufacturing can ultimately reduce costs
For an ordinary consumer, high-end cost performance often means that the product price is low but the quality is good. But for the three squirrels, it means a change in business model.
In the past, Three Squirrels positioned itself as an ecological platform for the snack food industry chain, with brand operation, product research and development, quality inspection, product sales, customer service, etc. as the core links it focused on, while non-core links such as product processing and logistics distribution were operated by professional partners. Three squirrels are responsible for integrating resources to connect producers and consumers.
However, under the strategy of high-end cost performance, the cost performance of the three squirrels' products has improved, not a single profit. This can also be supported by the financial report data for the first quarter of this year. According to the financial report, the company's gross profit margin was 27.40%, which was higher than the gross profit margin in the third and fourth quarters of last year.
The strategy of Three Squirrels is to ensure product quality through the optimization of the whole supply chain and realize the overflow of profits, and transfer this part of the profits to consumers, so as to achieve high quality and cost performance.
This means that the three squirrels will go deep into the production end of the product supply chain, and the business model of the three squirrels will change, and they will no longer be just an ecological platform, but will become a "manufacturing private label retailer".
Three Squirrels believes that the "high-end cost performance" of snacks is to achieve high-quality and differentiated products under the premise of leading total cost, and the best way to achieve all this is a private brand like Three Squirrels, and only its own brand can solve the customization of goods and the optimization of the whole link.
In 2023, the four core nut category demonstration factories of Daily Nuts, Macadamia Nuts, Pecans, and Pistachios independently built by Three Squirrels have been officially put into operation. The company has fully entered the independent manufacturing process of nuts, and has built an automated production line upgrade for categories such as "gift pack packaging, daily nuts, macadamia nuts, pecans, and pistachios". It has also built a joint venture with the world's top 500 Olam International, and at the same time, it has penetrated into the raw material production area with independent manufacturing as the key point, realizing the optimization of the whole link cost.
Taking the daily nut factory as an example, it has independently built 38 fully automated production lines, basically realized the unmanned material contact of the whole chain, greatly improved the production efficiency, and built the first integrated production and logistics model in the industry, which greatly shortened the distance from production to delivery under the efficient collaborative empowerment of channels, goods and logistics, and successfully created "seven-day fresh" products. In 2023, the revenue of the three squirrel nuts category will account for 53.59%, of which the proportion of self-produced nuts is about 40%, and the proportion of self-produced nuts will continue to increase in the future. At the same time, the overall output value of Three Squirrels (Wuwei) Health Food City reached 7 billion yuan, successfully realizing the resource agglomeration of the whole nut industry chain and becoming the largest shell nut processing industry cluster in the country.
The three squirrels believe that the ultimate cost reduction is to control the upstream end, from the daily nut factory, to the demonstration factory, and then to today's flavor nut factory, the company is approaching the final end of the product link, and laying the foundation of the supply chain for the high-end cost performance.